Iowa News

Iowa State Econ Department Working to Finalize Koch Deal for Market Research Program

Iowa State University’s economics department is working to finalize a multimillion-dollar funding agreement with the Charles Koch Foundation and another donor to expand a program studying Midwest markets that is headed by Peter Orazem, a professor in the department and member of the Ames City Council.

News of the pending agreement, first reported by the Cedar Rapids Gazette and worth up to $3.7 million as the university grapples with over $10 million in budget cuts from the Republican-controlled Statehouse, came after the newspaper paid $300 as part of an open records request for emails that were “heavily redacted, with some … completely blacked out except for the greeting.” The emails reveal strong divisions within the department, with some faculty members concerned about the potential politicization of academic research given the foundation’s association with the billionaire GOP financier after which it is named.

The foundation took interest in ISU because of a related Koch foundation’s past support of Orazem, who served as a Koch visiting professor of business economics at the University of Kansas from 2004 to 2005 and authored the funding proposal currently under negotiation. The Charles Koch Foundation has already given ISU $127,000 since 2014, split between undergraduate research in the economics department and the Greenlee School of Journalism and Communication (disclosure: where I received my bachelor’s and master’s degrees) for its annual First Amendment Day celebrations.

The university is one of 319 that has received support from the Charles Koch Foundation, and the only public university in Iowa, according to a list on the foundation’s website.

The money for ISU’s economics department, which Orazem told the Informer “has been devoted to allowing students to attend national meetings to deliver research and an annual trek to the Berkshire Hathaway meeting,” was a sliver of the tens of millions of dollars that Koch family foundations have poured into higher education in recent years — and since 1980, Koch aides estimate that amount has reached roughly $200 million, including funding for related causes. Often, the money has come with strings attached to promote the Koch brothers’ ideology of laissez faire capitalism.

Two recent examples of this occurred at Florida State University and the University of Kansas. At FSU in 2010, the Charles G. Koch Charitable Foundation — which in 2011 split into two foundations, including the Charles Koch Foundation — offered $1.5 million to the economics department in exchange for it allowing Koch representatives to approve hires for a new “political economy and free enterprise” program. And at Kansas, documents released in 2015 as part of a lawsuit settlement revealed that when the director of the university’s Center for Applied Economics urged the state Senate to repeal renewable energy regulations the previous year, he failed to disclose that his research had been funded by the Fred C. and Mary R. Koch Foundation.

“ISU is aware of issues that have arisen at Florida State and Kansas — and the memorandum of agreement is being written to prevent any problems with academic freedom,” Orazem said.

That caution is at least partly due to faculty concerns, as the emails obtained by the Gazette show. On Dec. 1 of last year, for instance, professor Joydeep Bhattacharya emailed department chair Joshua Rosenbloom with concerns about “getting on board a slippery slope with such an overtly political entity.” The following day, professor Leigh Tesfatsion — the partner of fellow professor Herman Quirmbach, a Democratic state senator — wrote Rosenbloom, “Your apparent willingness to consider an enticing funding opportunity for the Econ Department offered by the notoriously secretive and politically driven Charles Koch raises serious concerns regarding possible adverse effects on the academic reputation of the Econ Department.”

Not all of the emails were negative. “I am reasonably confident that ISU won’t enter into an agreement that gives CKF too much leverage or influence on the scholarship,” Rosenbloom told Bhattacharya. “The idea is great and safeguards are in place,” wrote professor John Beghin (a past critic of Quirmbach) on Dec. 7. “No funding is apolitical.” The following day, professor John Crespi wrote: “I want you to know I have no intention of dying on this hill. I always felt the proposal itself was sound and I am not against the merits of this position.”

Currently at ISU, Orazem said, “the Koch Foundation is not directing content and I am not concerned that the quality of my work or the work of individuals who get research funding from this venture will be compromised.” The funding would go toward a new faculty hire and expanding the ISU Agricultural Entrepreneurship Initiative’s Program for the Study of Midwest Markets and Entrepreneurship, which Orazem directs. The program’s other faculty members are Georgeanne Artz, an assistant professor specializing in ag and labor economics; Kevin Kimle, a senior lecturer who chairs the agricultural entrepreneurship initiative, established by Republican agribusiness tycoon Bruce Rastetter; and Rosenbloom.

The program focuses on thin markets, or markets with low numbers of buyers and sellers, in the Midwest, particularly in rural areas. Its research topics for these markets include entrepreneurship finance and venture capital; the retention of human capital; and “the roles of government tax, expenditure, and regulatory policies on entrepreneurship and economic growth.”

“I am pleased we were able to locate individuals and foundations willing to fund that line of research,” Orazem told the Informer. “We have tried to get funding on thin markets for years but it has not been a priority for other funders. Most of our work in the area has been a result of our own efforts and the half of our time that is expected to go toward research.”

Orazem has said he plans to step down from the Ames City Council when his current term expires at the end of 2017, in part to focus more on his teaching and research responsibilities at ISU.